“Tax-free income”, “fuel cheaper than water”, these are the slogans the millions of expatriates read in the virtual billboard before they set out for new pastures in the Middle East. But they are soon going to be the thing of past. The year 2015 witnessed the beginning of a major shift in the history of the Arab world.
No more tax-free?
In early December, the Gulf Cooperation Council agreed on the main aspects of introducing value-added tax (VAT) across the region. The move is one among the several measures the countries have been pressed to take to keep their economies upright after the slump in oil price.
Major financial institutions and rating agencies have long warned the economies in the region against various subsidies and urged them to consider new ways of raising revenue including introduction of taxes to deal with their ballooning fiscal deficits.
While expecting to implement the tax in three years, they have decided to exclude healthcare, education, social services and 94 food items from VAT, but they are yet to be of the same opinion on areas such as financial services. Corporate and excite taxes are also on the card.
Meanwhile, in a surprising move, Saudi Arabia’s cabinet approved proposals for a 2.5 per cent white land tax on undeveloped residential and commercial plots within urban boundaries in November.
Oil price deregulation
The UAE’s Ministry of Energy on July 22 announced that domestic fuel prices will be deregulated from next month. The second largest economy did so by scrapping heavy state subsidies as advised by major financial institutions such as IMF which estimated that the UAE spends $7 billion annually on petroleum subsidies which kept prices lower than the international average. In August, the prices of petrol went up while Diesel dropped. A fuel price committee has since announced fuel prices for each month after reviewing fuel prices against average international levels.
Earlier this week Bahrain’s cabinet approved a new pricing system for diesel and kerosene. This means there will be a gradual increase in the cost of both fuels in the country in the coming years.
On the same day, Saudi Arabia announced hike in prices of gas, diesel, electricity and water. The region’s biggest economy’s move by removing lavish subisies is expected to reduce pressure on the state budget.
Media reports have suggested that the GCC states have looked into plans to unify fuel prices within the six-nation regional grouping.
Foreign investors are welcome
Saudi Arabia opened its stock exchange, Tadawul, to foreign investors for the first time in June to become the last to do so among G20 members.
Tadawul is bigger than all the bourses in the six-nation Gulf Cooperation Council (GCC) combined. Since 2008, when the country began allowing foreign investors indirect access to the market, foreign investors were permitted to buy Tadawul stocks only through participatory notes and exchange-traded funds. But with the new policy in practice, qualified foreign investors (QFI) get direct access to deal in listed shares. While some market experts were very optimistic about the new move, others had warned about the restrictive nature of the opening as it came with loads of rules.
Regime change in Saudi Arabia
Salman bin Abdulaziz Al Saud became the king of Saudi Arabia after the death of King Abdullah bin Abdulaziz on January 23. Abdullah who was said to be aged nearly 90 had ruled the kingdom since 2005. King Salman named his and late king’s half-brother Muqrin bin Abdulaziz as the new Crown Prince and Muhammad bin Nayef bin Abdulaziz Al Saud as the Deputy Crown Prince. In a major cabinet reshuffle on April 29, King Salman appointed his nephew Muhammad bin Nayef as the new heir apparent, replacing Muqrin bin Abdulaziz. The new king relieved a number of ministers and appointed new names in another cabinet restructuring in July.
Martyrs’ Day in UAE
On August 19, His Highness Shaikh Khalifa Bin Zayed Al Nahyan, President of the UAE, decreed that November 30 will be observed as Martyrs’ Day to honour the martyrdom of Emirati soldiers who lost their lives defending the sovereignty of the nation. The decree states the commemoration day will be an annual public holiday in the UAE.
On the day, the flags will be lowered across the country from 8 am till 11 am followed by a one minute’s silence and supplication from 11.30am to 11.31am.